The theme for World Green Building Week 2024 is: Reduce, Electrify, Adapt. Shift to electricity today for a zero-carbon future.
We talked with Tetra Tech High Performance Buildings Group industry leaders, Nick Thurlow, Global Market Sector Leader for Existing Offices, NDY; Laurence Johnson, Director of Utility & Energy Infrastructure group, Hoare Lea; and Zoe Roberts, Senior Energy Consultant, Glumac, about the challenges and barriers our clients are facing when it comes to electrifying their existing assets, along with some of the solutions to these issues.
A version of this article featuring the full conversation with our HPBG experts originally appeared on NDY.com.
Why shift to electrification now?
The business case for electrification varies from building to building. It could be driven by meeting environmental, social, and governance (ESG) targets, incoming tenant energy requirements, changes to building rating schemes, plant end-of-lifecycle, or future-proofing against rising gas costs. However, your reason to electrify doesn’t need to be about the economic benefits. It can be driven by reducing carbon emissions as soon as possible. A plant that uses gas is emitting carbon that’s going to be in the atmosphere for up to 1,000 years.
An electrification project takes time
The reality of a decarbonization project for a portfolio of buildings is that the planning and long-term nature of these projects requires you to start sooner rather than later. You need to start thinking about your plan and methodology now so, when that time comes, you’re ready to implement projects.
Plan for your assets before end-of-life
What do you do if your plant end-of-life isn’t for another 10 years? One of the worst things that can happen is an emergency equipment failure with no plan in place. The equipment gets replaced like-for-like with its fossil fuel equivalent, and then you’re in the same position for another 15 to 20 years. Planning for it now means you’re ready when goals come around and you’re prepared for unplanned events.
Legislation is moving in this direction
Policy and legislation are changing all the time, and some asset owners think it’s better to wait for financial incentives, legislation, or confirmation of a new government’s direction. We know the direction in which legislation’s going; energy codes are becoming more efficient. Getting ready now is going to get you more prepared when it does come into effect.
Lettable value can increase
We’ve seen those that have gone first—and proven their targets and ratings—have seen a significant rise in lettable value. That high premium will probably only remain until everybody else has done the same so there’s good economic reason to go first and not be frightened. Buildings that achieve an outstanding sustainability rating—where you would definitely be all electric—can demand around 10 percent more in rental values for retail, just under 10 percent for offices, and around 6 percent for a mixed-use development that includes residential.
Risk of obsolescence
You don’t want to be left with a stranded asset when all your peers have decarbonized. This is especially important if you’re looking for a new tenant or coming closer to a break clause. The sentiment of any major tenant looking to sign a new lease in a commercial building is that electrification is front and center in the lease requirement.
Refinancing
Asset owners may have to refinance at a time that may not align with renewing leases or refurbishments. Some funding is only available if you meet certain criteria, for example, making progress on decarbonization.
What about the cost of electrification?
Access to capital for electrification projects is really difficult. Building owners haven’t worked out a way to fully rentalize the costs of these works. So, while the electrification process is seen as adding value to a building, it may not equate to the full value of the cost of electrification. These capital works aren’t highly visible to a tenant, so it may not be seen as an attractive use of capital.
Avoid stranded assets
Tenants are demanding much higher performing buildings. Electrification is a natural part of that alongside a larger package of improvements. What you don’t want is an ESG-driven tenant moving into a building that’s got gas-fired equipment and no electrification strategy. They want to see a plan for transition.
Understand the differential cost
You’re going to have to replace equipment eventually, so how can you show the differential cost of electrifying or the incremental added cost after you’ve considered planned maintenance work? If you can do this, rather than showing it as an entirely standalone system, that’s going to help your business case.
Establish strategic partnerships
We see a lot of incentive opportunities, either from the state or from utilities, but they don’t always stick around for a long time. So, if you want to capitalize on some of these incentive opportunities, you’ve got to have projects ready to take advantage of funds before they vanish.
Take control of your energy
Fossil fuels are cheap and, as we electrify, there’s a risk they’ll get cheaper. This suggests it’s going to be harder to pull away. While you can’t own your own gas field, you can own electricity. This is common in homes with photovoltaics on the roof. The same applies to a commercial building. Photovoltaics can be on a building’s own roof or on land in a different location. This approach enables you to take control of your energy source. In return, you get more stable energy prices.
What does the path to electrification look like?
Find the low-cost wins
It’s important to have a good picture of your portfolio as there will be some easy low-cost wins that offer high returns in terms of carbon and energy saving. For the bigger challenges—like a leaky building—you can plan and create budgets to improve efficiency before switching over. It’s important to have good visibility of your entire portfolio and the challenges in each building.
Reduce your electrical load
When you electrify, you’re obviously adding electrical load to a building. You want to think about how you can reduce loads to install smaller equipment. You don’t need to jump in and tackle your largest systems; you want to begin by using less energy and your existing systems in a smarter way.
Understand your plant life cycle
Knowing where your buildings are in their major plant life cycle is key. How old are the systems that you’re looking to electrify? Then, you can start diving deeper into what is an electrified building look like.
We work out what’s going to fit and the implications downstream, for example infrastructure impacts, structural and acoustic considerations, town planning, and future maintenance. Essentially, we paint a picture that captures all the elements of electrification so you have a detailed understanding of what’s required to go through the journey.
Get clear on your goals
Asset owners can come at electrification as something they have to do because regulation’s coming rather than as an opportunity to think about actual portfolio goals. What’s the story you want to tell? Electrification might be one goal, but what are the other things you want to achieve through these projects? As these plans and projects are often long term, there’s an opportunity to redirect your overall strategy.
Know that maintenance is straightforward
You might be thinking, “I understand my gas-fired equipment; it’s reliable, simple, and operational. These newfangled heat pumps are not something that we can trust.” Technology will continue to improve, but so long as you have a consultant who can tell you about the benefits of each type—for example air source or water source—it’s more straightforward that you think. Newer technologies are, generally, easier to maintain and less onerous than the gas-fired equipment.
Feasibility can take time
We’ve seen quite a few feasibility studies that, once you start scratching away at the detail, are not actually feasible. That could be because certain aspects haven’t been considered at the appropriate time, for example structural requirements. This means feasibility needs to start again. It’s important to understand what those major considerations are because they can have a high-cost impact and completely change the direction of your electrification strategy.
What am I going to get out of a feasibility study?
At the end of a feasibility study, you’ll have a suite of projects with timelines. This doesn’t replace the design phase; you’re still going to spend time and coordination efforts implementing projects. But understanding which to prioritize is hugely impactful on the sequence and extracting an overall picture.
How does the shift to electrification affect the grid?
Obviously, if you shift a building that’s on gas over to electricity, you’re placing additional demands on the electricity grid, and you’ll need to ask for more capacity from your energy supplier.
First come, first served
It’s generally first come, first served, so if you’ve electrified your building, put in your EV charging, and are paying for your capacity, you’re there first, which is a prudent thing to do. But if you’re not in early, you might have to be smart and think about your own energy generation and storage. There are good economic cases for it; you can shift all of your heating load to the nighttime when your building’s not occupied, or you can shift it to cooling loads to other times when solar is available with storage.
Demand-responsive buildings
Designing for load and demand management is going to become more standard as we decarbonize. This is where you have the opportunity to get your connection cheaper and quicker if you can shift your usage to when there’s greater grid capacity. Storage can be battery, ground source, thermal mass, and water, and many options are low cost.
Energy efficiency still matters
There’s always a benefit to a building owner in reducing emissions. Just because your energy is clean, it doesn’t mean it’s free. Using less is always going to be good from the bottom-line perspective. It’s not done at the moment because legislation doesn’t demand it.
Who has done electrification well?
Electrification is just one piece of the puzzle
At Hoare Lea, we worked on a residential building in London that was part of a large mixed-use development. A study showed that after a deep refurbishment, it increased its rentable value by 10 percent due to decarbonization and 20 percent overall when all refurbishment measures were considered. Electrification shouldn’t happen on its own. It should be one dimension of a bigger strategy.
Establish partnerships with utility providers
A successful partnership we’ve been seeing lately in our California projects is when a portfolio owner brings a utility provider on board. Many utility providers have their own goals and, when they’re active participants in the electrification discussion, we see better outcomes for business. An electricity provider in Sacramento is pushing forward electrification feasibility studies where they bring on a partner like Glumac.
We’re at the beginning of the journey
In Australia, I’d say there’s a handful of existing occupied buildings that have gone through the whole electrification process. However, there’s a lot of activity in terms of looking at electrification at a high level to then moving through into a more detailed analysis. In the next few years, there will be a lot of live examples that we’ll be able to draw on for lessons learned.
It’s easier with good data
Businesses that are having the most success with their feasibility studies are the ones that have good data. Gathering good data—over time—enables a quality feasibility study.
If you have the data to show your real building heating load is only 60 percent of what it was designed for, you know you can look at a system that’s sized for a peak which is 60 percent of what it was originally designed for. This would mean you don’t have to replace so much piping which brings down capital cost.
However, access to good metering data and actual building performance can be a challenge.
What portion of buildings don’t have the data available?
It’s likely that a large portion of B-grade stock is data deficient, and these buildings are at a high risk of obsolescence. This quality gap between new buildings and older buildings is going to become greater. This puts more emphasis on those building owners to do something to keep attracting tenants. There are modern buildings which don’t have access to this information either and to extract the information you need adds time. An older building will always have a utility meter, though, and it’s surprising what you can extract from that. Almost all meters are logged half hourly and you can see trends and make predictions based on that.